Slides Bijapurkarr

7/27/2019 Slides Bijapurkarr

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How to create value FROMow to create value FROM& FOR emerging marketsg g

Rama Bijapurkar May 09


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Future Storyuture Story Consumer society with total absence off

public goodsJ d t h k f l ti Jugaad patchwork of solutions low formal job creationow formal job creation Child escape velocity obsessed Do good > feel goodl id tit More complex identity , moreheterogeneous society Rama Bijapurkar May 09

g y


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Consumer wish listun - addressedL t t fi Low cost waterproofing Affordable Ready rice soak and eatAffordable Ready chapatis heat and eatffordable Ready chapatis heat and eat Cheap disintegrating diapers for 21 mn babies each year Quick drying one day paintinguick drying one day painting Less electricity consuming heater cum aircon Commuter pain relief anythingo er pa re ef a y h g Community lighting Well and river cleaning Quick building material Rama Bijapurkar May 09


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1. Mistakes developed market MNCscommonly makeo only ake2. Key challenges posed by ConsumerIndia3 Strategy and innovation agenda. Strategy and innovation agenda



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Common Mistakes of MNCsommon Mistakes of MNCsf. Theory of same evolution path



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The Ugly Duckling will evolvei h ili if lnto the Familiar Beautiful Swanand be ready for my GLOBALnd be ready for my GLOBALstrategy y



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Common Mistakes of MNCsommon Mistakes of MNCsf. Theory of same evolution path2 Value arrogance or how can they. Value arrogance or how can theynot want modernity?



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Delivering Customer Perceived Value

V =B C (as Processedb )y consumers)



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Suicidal Movesuicidal MovesDecrease price, decrease performance, make profit

Decreasefunctionality

Decreasestyling

Offer oldobsoleteproducts withroducts withno adaptation

Rama Bijapurkar May 09RAMABIJAPURKAR :

WE ARE LIKE THAT ONLY (PENGUIN) / WINNING INTHE INDIAN MARKET (WILEY)


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Common Mistakes of MNCsommon Mistakes of MNCsf. Theory of same evolution path2 Value arrogance or how can they. Value arrogance or how can theynot want modernity?3. Theory of income thresholds forconsumption take offonsumption take off4. Class market first, then mass,market at leisure Rama Bijapurkar May 09


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Many Indias - equally big economies,q y g ,but not equally rich, all contributingIncome Number of % of GDP Perncomepercentile Number ofpeople (mn) % ofincomethey have

GDP Percapita USDthey haveTop 1% 11 8.6 9164%op 10 % 109 34.1 3667Next 30% 326 36.1 1294Next 60% 653 29.7 367

Rama Bijapurkar May 09ource: Indicus Analytics, Rama Bijapurkar, 07-08


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Mass Markets will notsit around and wait.Someone else will get thereomeone else will get there

+ pay as you use .... White labelled store brands



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1. Mistakes developed market MNCscommonly makeo only ake2. Key challenges posed by ConsumerIndia3 Strategy and innovation agenda. Strategy and innovation agenda



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Economically Challengingconomically ChallengingDemand Structure



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Large economies of poor peoplePPP

Population GDP Rank GNI Per CapCountry PopulationRank GDP Rank GNI Per CapRank(% ofUSA)China 1 2 133(12%)India 2 4 167( %)ndia 2 4 167(6%)Brazil 5 9 105(21%)USA 3 1 3

Russia 8 7 76(32%)USA 3 1 10 (100%) Rama Bijapurkar May 09

3 1 10 (100%)World Factbook 2008


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Difficult Demand Structure,inusual consumption patterns

A LOT of peopleconsuming a littlebit each , adds uppto a LOT

Business economics of globalbusiness models dont work Rama Bijapurkar May 09

business models don t work


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Many, many, distinctiveyIndias. Increasing innumber.i f i iequires portfolio complexity>> current market worth> current market worth



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Monster Consumers & localonster Consumers & localcompetitors



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Consumers extract Valuee ex e Cut strips of Glucometer to minimum usefulf G fsizeMissed all i ati ell Missed call communication on cell. Micro glasses to serve cold drink. Refill, recycle almost anythingt t ki k tili ti d i Internet kiosk utilization and service



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P l b t t b k door, Rural, but not backward:embraces technologymbraces technology,information hungry, strivingg y gfor better, highly innovative ,

unusual value processingjill reject try low features at lowpriceRemove luxuries, not decreasenecessities



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Insidious hard to readnsidious, hard- to- read,slow-burn change ;low burn change ;Prefer this as well as thathybrid solutions



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Cell phone is Indias centralnervous system : the cellphone will change India the

h bil h day the automobile changedAmericamericaShiv VishwanathAnthroplogidtnthroplogidt



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1. Mistakes developed market MNCscommonly makeo only ake2. Key challenges posed by ConsumerIndia3 Strategy & innovation agenda. Strategy & innovation agenda



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How do you think about Marketi l?y Potential?Size of market for my value proposition andffusiness model? (potential offered BY the market)ORWhat value proposition and business model tomaximize market opportunity? (proposition offerede ke pp y (p p ffe eTO the market)

Nirma, Nokia, Nano , Suvidha, Subhiksha, STD/ISD booths, Pre paid cards,

SMS, Sachets, Cable Operators



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The Stressful Economiche Stressful EconomicChallengefChallenge Price able to pay is fixed =y fCHALLENGE PRICE

ithi thi h ll iithin this challenge price Deliver consumer acceptable performanceeliver consumer acceptable performance

(Product and service) At a cost that makes you profitable Rama Bijapurkar May 09RAMABIJAPURKAR :



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BIG Challenges

Company Mindset, beliefs,mental models Business DesignChallengesental modelsOrganization structure

f

Challenges

and governance for EM



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Business Design Challenges

Creating ValueAdvantage over others

Delivering consumeracceptable price performance,PROFITABLY

Demand structure requiresemand structure requiresnew business economics,portfolio complexity Innovative consumers& competitorsf p yMonster Consumer :Advanced products modest prices Local players, evenAdvanced products, modest pricesPatchy eco system to walkd d b ild it fi t

p yunorganized deliverhigh level of value to Rama Bijapurkar May 09

down a road, build it first , consumer


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Delivering Consumer AcceptablepPerformance at a Challenge Priceh h l d f Break through R & D - low cost, good performancesolution

Smart, Value Right product and service design Smart pricing designg g Smart manufacturing processes, low cost sourcingSmart market access market servicingmart market access, market servicing Smart credit Customer acquisition, market development Rama Bijapurkar May 09


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Variables to balanceariables to balance Price - volumerice volume Performance specs, usage modelp g Cost of delivering performance Cost of market access & communicationCost of management and complexityost of management and complexity Capital costs (including R&D costs)( g & ) Pay back period Rama Bijapurkar May 09


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Some learning on costL C t d Hi h T h Low Cost needs High Tech

High consumer capex can reduce variableigh consumer capex can reduce variablecosts capex cost to be borne by company Consumer variable costs is the silverbullet (100 kms / l benchmark)ullet (100 kms / l benchmark) Whole eco system has to be put in placep pnot just one piece of it. Rama Bijapurkar May 09


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Well Established Methods of Costell Established Methods of CostReduction fReduction Community use models.Mi iaturisatio for occasio al use Miniaturisation for occasional use Aggregation of thin front endgg eg o of f o ecustomer facing people / machines at fulli dervice mode. Market development via free informationarket development via free informationand knowledge and consumer credit Rama Bijapurkar May 09RAMABIJAPURKAR :



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Investments with long paybacknvestments with long payback Advanced product / service solutions atmodest prices: Economic challenge to besolved by innovationolved by innovation Patchy ecosystem participate in

building the road alliance web master Investment in innovation needed to winnvestment in innovation needed to winbig timed l i l i b d Need multiple strategies to be supported atthe same time



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Logic for investing in EMsogic for investing in EMs IPO Snowball

Building robust growth engines thatuilding robust growth engines thatcan ride the growth story, long term



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Need to Re-Examinee e x eEvergreen Business RulesMargin volume mix for healthy

Payback speed vs. long term growth

Complexity allowed per unit of value.

o on o sca e an sca e econom cs

Low cost products = low tech, low

capex

Capital output ratios hence


manu ac ur ng es prac ces


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CO CREATE WITHCONSUMERS THEYINNOVATE BETTER THAN BIGNNOVATE BETTER THAN BIGBUSINESSES



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The End of Corporate ImperialismWhile it is true that MNCs will changeemerging markets forever the reverse ismerging markets forever, the reverse isalso truethe opportunity that bigemerging markets represent , willdemand a new way of thinking [andemand a new way of thinking [andoffer new opportunities to changethings] requiring more thandeveloping cultural sensitivityeveloping cultural sensitivityC K Prahalad, HBR



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Agenda for Global Businessesgenda for Global Businesses Leverage existing competencies to create newcustomized emerging market solutions /business models: Make for Indiausiness models: Make for India

Develop new competencies and new businessmodels to strengthen value creationcapability of the companyy f p y

ADDRESS PROBLEMS OFBLOCKBUSTER RELEVANCEBLOCKBUSTER RELEVANCE Rama Bijapurkar May 09


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Thank You!



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Serve the rich and wait, or investin creating mass markets?


Emerging markets are not like


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developed markets were in theireveloped markets were in theirinfancy



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Winston Churchill had once dismissedIndia as "a geographical expression"-andia as a geographical expression aland that was "no more a single iountry than the Equator." Churchillwas rarely right about India , but.Competitive advantage comes from

y g ,Competitive advantage comes fromstitching together MY TARGET INDIAf bor your business



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Different markets evolve differentlybased on :(a) environmental forces(b)supplier actions(b) their starting point(c) social, cultural DNA



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Unorthodox competition



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Monster Consumer have been createdonster Consumer have been createdS ilt b Spoilt by:High tech + high touchgBetter for cheaper for 10+ formative yrsDeal making, brand cheapening suppliersInnovative small suppliers gray marketnnovative small suppliers, gray market

Demands cued by real time exposure andpinformation & smart local suppliersDemands >> purchasing power Rama Bijapurkar May 09

Demands >> purchasing power

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